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January 2012
Seeking Winning Benchmark Solutions
A company undertakes benchmarking activity with great expectations of learning valuable information from others that will help it improve results. Too often, after a flurry of activity, it learns little of value that will contribute to its future success. What goes wrong?
The failure to clearly distinguish between perfect solutions and winning ones can often inhibit benchmarking success. We might agree that perfection is impossible, but the focus of benchmarking efforts often belie this conclusion. A winning solution is simply a practical one that provides added value to both the customer and the company.
Five major pitfalls
In this issue of Top Talk, we will briefly discuss what we believe to be the Five Major Pitfalls that often cause benchmarking activities to fall short of expectations. In the next issue, we will present our Top Tips for avoiding these pitfalls.
Pitfall 1: Failing to establish realistic expectations
An organization generally embarks on a benchmarking effort to accomplish one or two objectives--to improve performance incrementally on a given set of metrics (quantitative benchmarking), or to accomplish major performance improvements through implementation of best practices (qualitative benchmarking). Achievement of these well-intentioned objectives often fails for three main reasons:
- Lack of clarity on what a winning solution looks like
- Over-optimistic estimates of the benefits, reach and timing of change, thereby undermining any positive results that may accrue from the initiative
- Over-estimation of the availability of implementation resources and commitments-- Potentially beneficial actions from a benchmarking initiative can outstrip the available resources or the comfort level of key stakeholders.
Pitfall 2: Failing to gain ownership
Many benchmarking and best-practices efforts are undertaken without clearly identifying who in the organization needs to "own" the outcome in order to successfully implement ensuring actions. Questions that need attention:
- What levels of the organization are instrumental to effect the changes indicated by the benchmarking or best-practices effort/ (First-line supervisors and hourly people are generally the most forgotten.)
- Which specific people are the prime candidates for sponsoring, championing and leading change?
- Which people are needed to approve requests for the financial and human resources necessary for implementation?
Failure to actively engage all key stakeholders in essential parts of the benchmarking process will impede success in achieving winning solutions.
Pitfall 3: Selecting the wrong benchmark organizations
This pitfall is most prevalent in qualitative benchmarking (quest for best practices), where the objective is to identify opportunities and actions for improving performance. Two potential misjudgments can lead to this pitfall. First is to select a benchmark company based mainly on its overall success, but, not necessarily on its excellent practices in the particular area of inquiry. All best-practices companies are not excellent at everything. Second is the tendency to select companies that are easily accessible, generally those in the same industry. Accessibility may be an easier route to take. But, to achieve best-practices performance requires learning from the very best, which are often companies in other industries. Implementation of winning solutions requires learning from winning companies, wherever they are.
Pitfall 4: Selecting the wrong benchmark data sources
The fundamental misstep underlying this pitfall is to opt for readily available benchmark data, versus making the extra effort to acquire truly comparable data. Off-the-shelf data (generally intra-industry) can lead to meaningless or misleading results. The data alone reveal nothing about the management, operating and accounting practices that underlie the enviable performance on a given metric. In addition more data might offer greater confidence in the comparability of the data. But more data does not necessarily translate to better data. In fact, more data may confuse or disguise the benchmark comparisons. The real data research question is: What data are germane and credibly comparable to provide the essential benchmarking insights? Winning solutions are directly dependent on the quality of the decision-making information.
Pitfall 5: Falling short of implementation knowledge
A major pitfall of qualitative benchmarking is assuming that identifying a best practice is the end point. On the contrary, it is the starting point. Knowing what a best practice looks like provides little or no insight into how to navigate from Point A (present state) to point B (desired best-practices state). The failure to tackle the deep-dive investigative work of implementation will leave the benchmarking organization without the practical knowledge of how to make the desired best practices a winning solution.
These are what we believe to be the
Five Major Pitfalls of qualitative and
qualitative benchmarking activities. In the next
issue of Top Talk, we will offer Top Tips that
will help you successfully avoid the major pitfalls.
If you can avoid these major pitfalls, you will be at
least 80% down the road to successfully meeting your
benchmarking objectives--to achieving winning solutions.
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